The EU, Lichtenstein and Immigration

In 2013, writing for the Institute of Economic Affairs, Robert Oulds of the Bruges Group, first explained that Britain can remain fully engaged with the Single Market and still have restrictions on immigration.

14th November 2016

The media would have it that events are moving towards a clean Brexit. Yet it is still worth considering that Britain does have other options. And these are not as weighted towards the interests of Brussels and Berlin as our European competitors mistakenly believe.

Other EU leaders should bear this in mind, their demands for continued free movement in exchange for being a part of the Single Market, or a free trade agreement, are not only unreasonable but also unenforceable. Not only do other countries have trade agreements without the obligation for free movement, even in the Single Market one small, yet notable, country has opted out from freedom of movement.

A core principle of the European Union is the free movement of peoples between member states of the EU. This is one of the main areas where people will see the effects of EU membership. The rules governing this are contained within EU Directive 2004/38/EC.

Under its rules deportation can only happen when ‘The personal conduct of the individual concerned must represent a genuine, present and sufficiently serious threat affecting one of the fundamental interests of society.’ It also states that, ‘Previous criminal convictions shall not in themselves constitute grounds for taking such measures.’[i]

Other areas on controversy concern the economic impact of migration. One a half million non-British citizens of other EU member states work in the UK, this constitutes around 5% of employment in Britain.

According to the respected think tank specialising in issues relating to immigration, Migration Watch UK, an immigrant will have to earn approximately £27,000 to make a positive financial contribution to the British economy. This figure is based upon the average earnings in Britain with an additional amount added on to make up for the cost of the additional infrastructure to support the new entrants into the UK. The need for extra provision in housing and education are issues. Naturally, an increase in demand without a corresponding increase in supply will drive up both rents and house prices. Immigration also influences depressing the average wage of existing British residents.[ii]

The least well of existing residents lose the most from immigration. For each 1% increase in the number of working age immigrants there was a 0.6% decline in the pay packets of those in the bottom 5% of the pay scale. The lowest paid ten per cent suffered from a 0.4% decline in their wages.[iii] What is more, the least skilled existing British workers had a reduction of 0.5% in their salaries.[iv] Over time salaries should increase, especially as inflation has been marginally going up.

Another cost of immigration is the transfer of money that migrants have earned in the UK back to their

country of origin. According to the World Bank each year $1.2 billion is sent from Britain to Poland alone.[v]

This is money that is leaving the UK and benefitting another state. This transfer of funds out of the UK to family in home state their home state, or to fund investments in their country of origin, is of enormous economic importance to many who reside in Eastern Europe.[vi]

The economist Professor Tim Congdon estimates that the influx of 700,000 new workers from Eastern Europe had displaced some British born workers, costing the UK economy ⅜ of 1% of its economic output.[vii] This is not a great figure, yet for those that have a lower chance of employment the effects can be devastating.

Much of these costs, however, rely on the immigrants being economically active. According a report by the European Commission the number of non-working immigrants from the EU had risen from 2006 – 2012 by 42% to more than 611,779. According to the same report between 2008 and 2011 there was a 73% increase in the number of people from the EU coming to Britain without a job..[viii] Of the more than six hundred thousand economically inactive EU migrants to Britain as little as approximately 10% of them are claiming job seekers allowance.[ix] Yet, there is still a cost to their residency in the UK. It has been estimated in the Commission report that they are costing the British National Health Service £1.5 billion per year.

Dry economic numbers are not the only considerations when assessing the impact of immigration from the EU to the UK. There are also social considerations and matters of community cohesion. The former Labour Home Secretary, Rt Hon. David Blunkett MP, warned on 11th November 2013 that the influx of Roma from Eastern Europe may cause riots on the streets.[x]

Though there is much discussion about migration from the rest of the EU to the UK, 1.8 million UK citizens live in other EU states. They take advantage of the free movement of persons - a right enshrined in EU treaties. Those that have established a residency, which will include both living and owning property, in an EU member state will have their rights protected upon withdrawal.

This entitlement is known as an ‘executed right’. Article 70 b. of the Vienna Convention states that the withdrawal from a treaty ‘Does not affect any right, obligation or legal situation of the parties created through the execution of the treaty prior to its termination.’ This view is supported by the constitutional expert Lord McNair. He concluded that such rights established by a treaty will remain in force even if the agreement is terminated by Britain’s exit. In law they are considered to be executed by the treaty and “have an existence independent of it; the termination cannot touch them.” Their status will be guaranteed because of the “well-recognised principle of respect for acquired [vested] rights.”[xi]Furthermore, it is a legal norm and the Oxford Journal in its year book on international law argues that Acquired Rights are Customary Law and therefore take precedence over national law at the international level. And will be regarded as such by the International Court of Justice in The Hague.

Indeed, any attempt to cancel the right of French and German citizens already in the UK live and work in Britain would be diplomatically contentious. London has a large French population. According to a November 2013 report by the Centre for Research and Analysis Migration, between 2001 and 2011 immigrants to the UK from the EEA contributed 34% more in taxes than the British state spent on supporting them.[xii]

Therefore the impact of Britain leaving the EU will not be that great for those EU citizens already resident here or for British citizens living abroad. The difference will be felt by those who move to a different state after British withdrawal.

These issues surrounding immigration are used by both sides in the on-going debate as to whether Britain should remain in the European Union. Some argue that Britain should leave to control immigration from Europe, on the other side the issue of the free movement of persons is intrinsically linked both politically and legally to free access to the EU’s Single Market. That has been made clear by the German Chancellor Angela Merkel and should Britain choose to leave the EU free movement will be a condition on any new free trade agreement.

Yet there is another way. Britain can leave the but keep full access to the EU’s Single Market by re-joining the European Free Trade Association and remaining in the European Economic Area. This will also allow for some action to be taken to control immigration.

Liechtenstein, an EEA member with less potential influence than Britain, continues to use clauses in the EEA agreement to restrict the movement of persons. Article 112(1) of the EEA Agreement reads: ‘If serious economic, societal or environmental difficulties of a sectorial or regional nature liable to persist are arising, a Contracting Party may unilaterally take appropriate measures under the conditions and procedures laid down in Article 113.’ The restrictions used by Liechtenstein are further reinforced by Protocol 15 (Article 5 – 7) of the EEA agreement. This allows Liechtenstein to keep specific restrictions on the free movement of people. These have been kept in place by what is known as the EEA Council.[xiii] Last year Lichtenstein gave residency to just over 70 people. At present, in the EU, Britain is obliged to accept hundreds of thousands each year.

There will also be greater latitude to restrict non-British EU citizen’s access to benefits and to deny residency to those who are deemed to not have sufficient resources to support themselves. The current debate in Britain on immigration largely ignores the role of the European Court of Human Rights and the European Convention.

Article 3 of the Convention (inhuman or degrading treatment or punishment) and Article 8 (private and family life, his home and his correspondence) would also be relevant to the issue of immigration. These two articles are often taken together, especially in cases of repatriation.

EEA/EFTA states are outside Article 6 of the EU’s Treaty on European Union, which states:

2. The Union shall accede to the European Convention for the Protection of human Rights and Fundamental Freedoms. Such accession shall not affect the Union’s competences as defined in the Treaties.

3. Fundamental rights, as guaranteed by the European Convention for the Protection of human Rights and Fundamental Freedoms and as they result from the constitutional traditions common to the Member States, shall constitute general principles of the Union’s law.

Immigration into the UK cannot tackled properly until the, non-EU, European Convention is interpreted with greater diligence. There is scope for this through exiting the EU but remaining in for the time being the European Economic Area.

The EEA relevant rule relating to freedom of movement has qualifications, conditions and limitation.

(10) Persons exercising their right of residence should not, however, become an unreasonable burden on the social assistance system of the host Member State during an initial period of residence.Therefore, the right of residence for Union citizens and their family members for periods in excess of three months should be subject to conditions.

(12) For periods of residence of longer than three months, Member States should have the possibility to require Union citizens to register with the competent authorities in the place of residence, attested by a registration certificate issued to that effect.

(22) The Treaty allows restrictions to be placed on the right of free movement and residence on grounds of public policy, public security or public health.

Article 7, 1 b)

(b) have sufficient resources for themselves and their family members not to become a burden on the social assistance system of the host Member State during their period of residence and have comprehensive sickness insurance cover in the host Member State.[xiv]

No right is absolute, and neither is freedom of movement within the EEA. What is more, EEA rules only apply to EFTA nations after they have assessed the relevant legislation and applied it according to their own interpretation of what freedom of movement means.

Much can be done unilaterally. As an EEA member outside the EU, the UK will also can re-write EEA relevant rules. Whilst they must still broadly conform to existing legislation it will grant some latitude to make sure that British interests are better served.

Iceland unliterally opted out from the free movement of capital after its crash in 2008[xv], Lichtenstein is outside the free movement of persons. Britain can do the same. Knowing this tells us that the EU’s negotiating position is a weak one. We will have our cake and eat it, and apportion it to our own citizens and residents first.